Interview: Jim French, chairman of Flybe

IT'S been a bumpy ride these past seven months and Jim French, chairman and chief executive of Flybe, is the first to admit it.

But he is now plotting what he hopes will be a somewhat smoother course as the regional airline embarks on its much-awaited European expansion.

Last month's move to grab a majority stake in Finnish Commuter Airlines (FCA) did not surprise analysts, who had been expecting a strike in this direction since Flybe's flotation in December. As analysts at Royal Bank of Scotland Equities succinctly put it, European expansion was a key plank in the initial public offering story that netted Flybe 60 million to fund its offensive.

But the market listing inevitably laid Flybe bare to the vagaries of operating in this embattled sector. The company soared in its first week as a listed business, its shares climbing more than 7 per cent from their initial price of 295p. Weeks of no news on the acquisition front subsequently curbed the market's enthusiasm, but the crash came in May when Flybe warned that its year-end profits would be lower than expected because of high oil prices, the weak economy and severe weather conditions.

In the end, the Exeter-based airline posted a pre-tax loss of 4.3m, with the volcanic ash cloud and winter freeze all but wiping out underlying profits of 22m.

A savage sell-off after the warning knocked a quarter of the value off Flybe's stock, but investors have more recently focused on management's cheerier comments on current trading. Even so, at a close of 177p at the end of last week, the shares are still well south of their point of origin.

"We have got our scars, no question," says French, 58.

The industry veteran knows plenty about taking the rough with the smooth, having started his career more than four decades ago as a clerk working at Prestwick Airport for Caledonian Airways.

Berwickshire-born French eventually transferred to Caledonian's Gatwick operations in London, then joined Air UK in 1980, holding a number of senior roles in commercial, marketing and planning operations. In 1990 he joined what was then known as Jersey European Airways, the forerunner to Flybe owned by the late steel magnate Jack Walker.

French was appointed chief executive of Flybe in June 2001, just three months before the 11 September, 2001 attacks in the United States that shut down large parts of the industry for several days and crimped aviation growth for years after. It's one of many blows to the industry he has witnessed through the years, ?but quite different from the present challenges.

"It was hellish for a week, and then it was over with.

"Now we have a situation where the consumer is starting to really feel the impact of all that has happened in the economy over the last few years, and is adjusting spending accordingly, and that is going to take some time to work through."

Flybe has seen a rebound in the business travellers that make up nearly half of the 7.2 million passengers it carried last year. During the height of the recession, this part of the company's business fell off by about 40 per cent.

The challenge now is to revive sluggish demand among leisure travellers, who account for 55 per cent of all journeys.

Meanwhile, fuel costs remain stubbornly high. Flybe is currently hedged against 85 per cent of its consumption, meaning it is protected from much of the price increases, but these hedges will unwind during the next 12 months.

It could lead to questions over whether this is an appropriate time for Flybe to take a lead in consolidating European regional air travel. In typically direct fashion, French argues that the strategy remains sound.

"Every person's challenge is another person's opportunity," he says. "I would say it is exactly the right time, as long as we do it sensibly."

French says the 60 per cent stake in FCA (national carrier Finnair owns the remainder) illustrates perfectly the opportunities for Flybe in the fragmented Continental market.

Large carriers struggle to make money on the short hops Flybe services with its 85-seater planes, yet are keen to ensure they can meet the onward needs of long-haul travellers landing at a major airport. Flybe plans to expand FCA's services between regional airports into Sweden, Denmark, Estonia and Latvia, complementing Finnair's international links to Europe and Asia.

The FCA operations of which Flybe is today set to take control will immediately add some 900,000 to the British carrier's annual passenger numbers, further bolstering its lead as Europe's largest regional carrier. But, with about 150 million flying from region to region on the Continent every year, there is still much more to play for.

"We are looking at acquisitions across Europe, we are looking at organic growth across Europe, and we are looking at partnerships," French says. "While we have got one team working on digesting this acquisition, we have got another team looking for the next opportunity."

Background

Berwickshire-born Jim French was educated at Ayr Academy and Strathclyde University.

He started his career in aviation as a clerk at Prestwick Airport for Caledonian Airways.

In 1990 he joined what was then known as Jersey European Airways, the forerunner to Flybe. He was appointed chief executive of Flybe in June 2001.

French was made a CBE for his services to the airline industry in 2009, and last month received an honorary doctorate from the University of Exeter.

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